Gold/Silver: How vital are ETF inflows for precious metals?

Precious Metals remained supportive this week in light of PCE data aligning with expectations. The lack of an upward surprise reaffirmed markets and drove the S&P 500 to its 14th-record close. Bitcoin and other Crypto assets stole all the attention with multi-week Billion Dollar ETF inflows, creating more trading volume in Bitcoin ETFs than the SPY and QQQ. Gold ETF outflows recorded 12 straight days and are down 3.5% YTD, indicating a lack of interest in the Precious Metals. Does the lack of interest bother me? Not particularly, because the volatility will die down in Precious Metals, and like a sleeping alligator, when it finally wakes up, it will eat and eat a lot! I suggest staying nimble and focusing on the small futures contracts that give you the flexibility to enter and exit 23 hours per day, six days a week; you never know when that alligator will wake. 

In the near term, Precious Metals will continue to digest economic data to guide when the first interest rate cut will come. Next week, we will have the February employment data marked on our calendars where any significant changes could lead to adjustments to the CME’s FedWatch tool. Current expectations for an interest rate cut at the March meeting are non-existent, but May still has a 25% chance and 65% in June. The interest rate cuts’ timing, pace, and depth will propel Precious Metals. Studies have shown that since 1990, the first interest rate cut after a hiking cycle has resulted in a 6% gain (on average) in the price of Gold over the next 30 days. We will want to position ahead of time. 

Daily Gold Chat

Since correcting below $2000/oz only once in 2024, Gold futures quickly rebounded and found complacency between the 50-DMA ($2052) and the 200-DMA ($2021). Where ETF demand lacks, Central Bank buying has provided an invisible price backstop. After the PCE number fell in line with expectations, prices attempted to break above recent resistance, achieving an intraday high of $2066.1 (as of this writing), only to be met with additional selling pressure. It will take a close above $2060 and an additional close above $2072.5 to attract new market participants. I recommend looking for prices to drift below $2030 to build a long-term core position in anticipation of the first interest rate cut. 

Having the flexibility to enter and exit the market quickly makes it essential for Precious Metals investors to have a futures trading account alongside their core Physical Precious Metals holdings. If you are interested in speculating on the rise and fall of the price of Precious Metals on a shorter-term basis, such as two weeks or two months, or If you have never traded futures or commodities, check out this new educational guide that answers all your questions on transferring your current investing skills into trading “real assets,” such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book. 

Daily Silver Chart

With the Gold/Silver ratio trending back to 2024 highs, it remains clear that Silver needs to attract the same buying interest of other industrial metals to get out of its rut. Solar stocks remain heavily shorted by funds that could lean on physical demand. My philosophy in investing in Silver is to buy it when no one wants it and sell it when the world is chasing it. Prices are trading in a band with $26 on the upside and $22 on the downside, where our models indicate below $23 as a good “long-term” value. It will take a move above $23.50 and $24 to trigger new net ETF inflows that can increase prices significantly. 

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